Elephant in the room

I know that a lot of people that read this blog are appalled by government incentives to industry. I respect that opinion. In fact, I would fully support a full agreement among all North American jurisdictions to refrain from any cash or targeted tax-based incentives. However, we don’t have that and we can’t just ignore facts like this.

The Ontario and Canadian governments put $123 million into about a $530 million Chrysler plant expansion. That works out to be 23% of the total capital cost of the project. We can’t do a ‘per job’ calculation because there are no new jobs associated with the expansion (at least announced).

Now, some say this ‘protects’ the 4,800 jobs. This is called ‘retention’ of jobs. This is somewhat of a slippery slope because the same logic is being used in Newfoundland and other areas to bail out pulp mills. Eventually, this looks like the government bailing out companies with bad business models to retain jobs and no new growth.

But, really, that’s not my point here.

My point is to reiterate ad nauseum the theme of this blog. The NB government talks about self-sufficiency and then turns around and funds BNB at less than half of its funding level a decade ago (expressed as a percentage of government spending and including funding programs). The feds talk about the importance of regional development and similarly have been decreasing significantly spending in this area (as a percentage of overall program spending).

We talk about attracting people (migrants and immigrants) and then spend among the least in Canada in this area.

Ultimately, governments put their money where their priorities are. It’s that simple.

As an example, local officials have been calling for a ‘convention centre’ in Moncton for at least eight years (that’s the first time I heard about it) and not a nickel. Every Premier, MP and MLA has mentioned it but none have raised the funds. Meanwhile they have funded new bridges, a new stadium, etc. The reality that few want to acknowledge is that there really is no interest in funding a convention centre at the provincial or federal level. It’s that simple.

The principle can be applied broadly.

If you want economic development, fund and structure it properly.

If you want to attract people, fund and structure it properly. Cripes, we have had a population secretariat since 2003 and only now we are doing ‘consultations’? No, there have been numerous studies done since 2003 and numerous consultations. Now we go through another round. I’ll be happy when they get down to saying we are going to do these three things, allocate this much funding and expect/measure these results.

Other than that it’s just more smoke and mirrors – acting like you are doing something when you are really doing almost nothing.

Your daily tee hee hee moment
Canada too small for CPP investment fund; commits $573M to European fund

Remember my constain complaining that almost none of our RRSP, pension and government pension contributions is invested in New Brunswick to help grow our economy here? It goes without saying that the Canada Pension Plan doesn’t have a nickel here either. But I had to laugh this morning when I read that the CPP is saying that Canada is too small a market for all their investments and its putting money into fuelling economic growth in Europe. In some ways, Canada is a big New Brunswick, I guess.

But the truth is more stark. These pension fund managers are not tasked with using our pension monies to support economic growth here. They are tasked with growing the investment – plain and simple.

Not so in Quebec where a significant portion of public pension monies is allocated to support economic development in Quebec – and in my opinion it hasn’t done too badly.

The bottom line is that if just 10% of our RRSP and pension monies were invested in New Brunswick it would represent billions of dollars worth of growth capital.

It will never happen, but it does make you stop and think.

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0 Responses to Elephant in the room

  1. www.broadcastnb.com says:

    That’s my point. Saying “it will never happen” is a political statement. It will ‘never happen’ if people don’t try to make it happen and find ways to make it happen. Its hardly surprising that it hasn’t happened when even the most educated in economic development are claiming its simply ‘impossible’. That is a VERY odd view of how government works. You’d almost think it was the middle ages under some feudal lord and the peasants were saying “well, he’s never going to do THAT”.

    The question is, IF that suggestion is made, where would the money go? What companies, what types of investments would it be put into? Any suggestions?

  2. David Campbell says:

    I am actually a fairly optimistic guy – generally and I have seen some interesting examples of successful economic development in the Maritime Provinces. There are certainly no perfect models but the call centre sector, the aquaculture sector in New Brunswick, Slemon Park on PEI, financial back offices in Nova Scotia, etc. Here’s the problem. It’s not a question of finding ‘investments’. It’s a question of ambition. You can talk all day about self-sufficiency but without resources (human and financial) you will get nowhere. Look at Gov. Rendell in Pennsylvania or Gov. Blagojevich in Illinois. They campaigned on revitalizing their state economies and they came in with new funding programs, new sector strategies and new marketing efforts. The Libs campaigned on some nebulous objective called “self-sufficiency” but there has been no new funding programs (except a few bucks for the ‘Chi), no new sector strategies (unless you call energy a sector) and no new marketing efforts. No people attraction strategies. Nothing. So we will study, we will consult, etc. etc. etc.

    But to you basic concern over my statement “it will never happen”, I stand by it because it actually “never has happened”. Not in my lifetime or yours. The only government funding of industry that comes close to what Ontario does several times a year was the Michelin plant in Nova Scotia. You will never see the provincial government put $100M in support of a billion dollar project in New Brunswick because no one has the guts to do it. Strip away the ideology – no one has the guts. Ontario? Sure. Quebec? Sure. Alberta (tax breaks for oil sands in the hundreds of millions)? Sure. Illinois? Alabama? Mississippi? Kentucky? Georgia? Sure. But New Brunswick, never. Maine. Never.

    It’s not about ‘the money’. It’s about the level of commitment to economic development. Building a world class green energy industrial park seeded by government support designed to attract global data centres looking to be green saavy, could be a good strategy. But you just aren’t seeing anything like that around here.

  3. NB taxpayer says:

    That’s the point. Unlike more fiscally responsible provinces like Alberta — who banned corporate welfare at a provincial level— Ontario (notwithstanding the Harris administration) has been a frequent offender under Rae’s NDP government, not to mention, the current provincial government under McGunity and the old federal governments of the Liberals under Chretien and Martin.

    However, at the moment, it doesn’t appear like the feds are sticking to their guns where they said they would stop the practice of corporate welfare (i.e. get rid of ACOA, TPC, etc.) In other words, they have betrayed their core principles in order to play to the mushy middle (which they think will get them elected). Big mistake.

    Furthermore, John Tory has done a poor job, thus far, at tapping into the outrage caused by increased taxes and excessive corporate welfare (slush fund) recently.

    Methinks that’s why Tory’s PC Party and Harper’s government have stalled in the polls recently and don’t seem to be resonating with voters.

    Not surprising.

  4. NB taxpayer says:

    For the record, I still think the TSN turning point for Canada was when the Tim Horton’s crown (middle class) rejected the out-of-control spending of the Liberals and embraced the 2006 election planks of the Harper Tories. (i.e. small and responsible government, less waste and corruption and low taxes across the board)

    With years of bad government and bureaucratic waste, it was definitely a good start IMO.

    In other words, the patient has agreed to take the medicine, but he/she is still not better.

    Let’s hope the doctor, in this case the Harper government, remembers they pledged to make things better. At the moment, they seem to be offering the same old poison.

    However, I’m an optimist, so I haven’t given up on economic freedom just yet. Let’s hope they can turn it around soon.

  5. www.broadcastnb.com says:

    You think Harper turned into Paul Martin on election night by a fluke? Of course not, the people of ontario aren’t idiots. When he came around the first time and campaigned on getting rid of corporate welfare he was trounced in ontario, during the next election, the topic was never mentioned and of course we’ve seen how the Harper liberals behave.

    But I’ve gotta laugh when I hear Alberta got rid of corporate welfare. That’s REALLY rich. Canadians shelled out over a BILLION and a half to the Alberta beef industry when they got banned from the US, and as mentioned, TWO BILLION goes to the tar sands in some pretty specious tax concessions that aren’t available to anyone else, and even Harper knows that, and claims to be getting rid of them. And I recall several blogs here talking about the many Albertan government investments in industry, so lets be real.

    Not to mention the MOTHER of all federal bailouts, which is making sure that natives and canadians can’t get access to any of their own resources. Go do some research on the gas wells in Alberta and BC.

    Canada has been on the UN human rights list for decades all thanks to the treatment of the Lubicons. So by making sure the RIGHTFUL owners can’t get access to their resources, well, maybe YOU don’t call that a subsidy, but to me every other cash subsidy doesn’t even compare to the outright robbery that the feds conducts for ALberta.

    But back to the central point to David, you are assuming that New Brunswick has a political structure like Nova Scotia, Ontario or Quebec and that’s not the case.

    You’ve got a barely majority government in a province pretty much split in two, with a family owned media that can bring down either party with no problem, and a vested interest in resource extraction and hundreds of other business interests.

    So you ARE right-to a point. That’s not to say its not possible though. As you say, the call centres are an example, and of course Bricklin was an example. And again, we have Molsons, Bennett, the LNG terminal, that knitting company that some bloggers keep talking about, and the mills.

    So there is no question that investment is there. Its there for the people who LOBBY for it, just like it always has. If you don’t work the system, as the animation guys in Miramichi can attest, you don’t get squat. That sometimes hurts, sometimes helps. Now they are getting successful enough to be on the radar so are getting some notice, but we don’t know how much.

    For YOUR suggestions, its far trickier. Do you take needed money and attempt to go on a marketing spree, or do you service your basic clientele? We know the answer to that, just how much hurry have they been to increase the minimum wage as per the self sufficiency task force?

    So that’s where it stands. Its the great Catch 22 that is part of politics. Once you assume that something CAN”T be done, in effect it WON”T be done simply because nobody tries. Blogging is not the same as lobbying. It IS possible, since I can guarantee you that if you crunch the numbers then people would pay attention, even the self sufficiency task force survey says that New Brunswickers are far from being the ‘status quo’ kind of followers that some bloggers have made them out to be.

    The point is, people first need to know the options. Once the options are known, then the people have to know HOW to implement them. That’s legislation. Again, just go back to how roomers and boarders finally got rights. A problem was discovered, a solution was made public (removal of one line from the RTA), and then a lobby was set up. And while it still hasn’t become law yet, its at the final stage.

    And like I’ve said, that lobby was essentially two guys on welfare. People just don’t understand that there are lots of different kinds of politicians, but government in many cases would LOVE people to get more active. Graham can’t flip Irving the bird and say “no, we’re going to make solar panels instead” without heavy duty voter support. That’s the same with your pet projects on immigration and economic development.

    That’s why democracy always rests on the people, not on a government that has NEVER said it is interested in the well being of all the citizens.

  6. NB taxpayer says:

    Canadians shelled out over a BILLION and a half to the Alberta beef industry when they got banned from the US, and as mentioned, TWO BILLION goes to the tar sands in some pretty specious tax concessions that aren’t available to anyone else…

    Not so much as there is not alot the premiers can do about federal corporate welfare. In other words, it’s up to them to clean their own act up. (which many were pressuring Maxime Bernier — a small c conservative — to do while he was in Industry) Not sure how that will go now that red tory Jim Prentice is administering that portfolio?

    However, you’re right, agriculture has been a heavily subsidized industry historically. But this is the case in Ontario, Quebec and in all of Canada. I was thinking more along the lines of manufacturing and the high tech industry which fall under TPC and the old DIPP handouts — and ACOA out our way.

    Here’s a quote, from Ralph Klein in the legislature when he declined to rescind the ban on corporate welfare in 1999:

    “If we say to this chip manufacturer, ‘you get $100 million or you get a special loan or loan guarantee,’ what do we say to other, smaller companies who receive absolutely nothing, who established businesses on their own hook without any government assistance?”

    Let’s just say I haven’t seen that type of policy stance in the Ontario legislature [notwithstanding Mike Harris] nor have I ever seen it in Quebec or the New Brunswick legislature regardless of who’s in power.

    Translation: Bernard Lord’s tories took the same stance as Hatfield, McKenna and Graham. It’s an accepted disease.

  7. NB taxpayer says:

    Brought to you by your friendly neighbourhood Glib and Frail today:

    “Well, duh. The Liberals are handing out cash by the barrel because it works. Every once in a while, a leader can win public favour by saying no – Mike Harris comes to mind – but voters prefer to hear yes.”