Ask the right question

From Yarmouth to the Miramichi politicians are running around trying to reassure communities that the government is committed to help them.  Then comes the train of solutions – new cash, small business support, bailing out questionable companies, building infrastructure – all in the name of helping these regions. 

Yet, when the dust settles many of the same issues exist and when government is asked why? – the answer is “but we spent lots of money”. 

The fundamental issue in the Miramichi or Yarmouth or Cape Breton – indeed in the Maritimes as a whole – is a lack of business/private sector investment which is the foundation for jobs and economic activity.    Instead of jumping right to the small business card, economic developers and governments would be wise to step back and ask a different question.

Quite frankly, the modelling is pretty simple.  You could figure out on the back of a napkin what level of investment would be needed to turn things around in Yarmouth (where that investment comes from would take a pile of napkins).  But once that is figured out, then you get to looking at solutions.

In the Yarmouth case, they are convinced that the ferry to the U.S. is critical – that may be so I haven’t studied it in detail.  If so, maybe government should take a more serious look. 

Government is funny.  They will spend $50 million/year on seasonal EI in that area without even blinking but $3 million to subsidize a ferry – gosh,  no!

Or we will spend close to $400 million a year on seasonal EI payments in Northern New Brunswick every single year but a few hundred million to put natural gas infrastructure in Northern NB – gosh, no!

I’m not necessarily advocating for either – I’m just pointing out that government is far more comfortable cutting cheques to people than investing in big ideas.  The former is politically much more easier (how many times have you read about someone being outraged about EI payments?  Now think about the outrage if the government paid for natural gas pipes to ‘nowhere’).

These aren’t easy issues – if they were they would be solved by now.  You know my view on Nova Scotia.  I think the province needs an urban node strategy.  You can’t have roads to nowhere and that is the current model in Nova Scotia.  A hugely successful urban core with 42% of the provincial population and directly influencing over half the population – and everywhere else things are peetering out.  

I’d have a 50 year vision for NS that included an urban node somewhere in the Yarmouth/Digby area, one in Amherst and one in Cape Breton (maybe one in Pictou).  I’d make sure there was four lane highways/longer term trains, natural gas pipelines and other infrastructure connecting the urban nodes to the hub. 

That doesn’t mean ignoring everywhere else – I think the rest of the province would infill over time and it would be a far better model. 

Now, highway infrastructure starts in Halifax and literally peeters out as you get a certain distance away  – except towards Moncton because there is a connecting urban node.

Governments should have the longer term vision and should create the conditions where private industry can invest and flourish.  I know that sounds trivial but sometimes we need to come back to the highest level on this stuff.

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6 Responses to Ask the right question

  1. Scott says:

    It would be nice to see a troika of ‘urban nodes’ pivot off of the hub via infrastructure, communication and investment. But somehow I feel that government will just con’t with the same old approach. Must make you feel a little like you are locked in the mindset of Mary Higgins trying to educate Eliza Doolittle in My Fair Lady,/i>, trying to create something that does not exist. And probably never will. All they do is disappoint.

  2. richard says:

    Perhaps NS is just waiting to see how our three ‘urban nodes’ work out.

  3. I know it’s peripheral to your main point, but there’s a serious apples-oranges problem when you say, ” They will spend $50 million/year on seasonal EI in that area without even blinking but $3 million to subsidize a ferry – gosh, no!”

    The one is a capital investment program, the other is an insurance system. If your house burned down and your insurance company said “instead of paying you your settlement we’ve decided to invest in a hotel instead,” you would be rightly upset. EIC isn’t a government slush fund; it’s a (currently profitable) insurance program that has a responsibility to sustain its payouts.

    To the more central point, the question of capital investment itself: I think it’s a given that we cannot depend on the private sector to make the capital investments necessary to ensure prosperity in the region. If it was going to happen, it would have happened by now. Instead, we have what has become the current model of private investment: government makes the actual investment, combined with maybe a little, if any, from the private companies involved, and then the entire enterprise is turned over to the company (which often shuts it down once the flow of government investment stops).

    I think there would be greater support for the idea of government investment in economic development infrastructure in the region if there was a sense that we’re all in this together. But it’s pretty hard to watch the government money flow out and end up straight in the coffers of some company or another (often one beginning with the letter I, which does its level best to prevent government from spending money on anything but its own projects).

    Personally, I think that if governments launched major projects and allowed private investment, on its own dime, to try to monetize the spin-offs, there would be a lot more support. To pick a bit of a pie-in-the-sky example, if the government invested in a Cape Breton orbital launch facility, it would be more widely supported as a public investment than as a subsidiary of some airline or shipping company.

    As for the urban nodes, while I’m inclined to agree in theory, however what we have in New Brunswick is the realization of that approach, three minor ‘node-cities’ as opposed to a central hub, with no greater degree of prosperity. So I wonder whether the node theory boils down to the uncontroversial ‘”it’s better to have two major cities than one,” rather than some theory about the distribution of population and resources in the province.

  4. scott says:

    Instead, we have what has become the current model of private investment: government makes the actual investment, combined with maybe a little…

    I think the ethos has always been that government can be the only vehicle in creating wealth and prosperity. Unfortunately, they do it by redisributing the hard earned wealth of its citizens to firms that are either looking for an easy buck or those that have no business being in business. As well, the issue in New Brunswick is not only “public vs. private” when it comes to who does a better job investing capital dollars, it’s also the issue of “monopoly vs. competition.” We’ve learned in New Brunswick that not allowing the profit motive and competition in on the process of government is only due to the motivation of a few (i.e. the chief monopolizers). Until this ethos changes abd competition is allowed to fully bloom through less intervention, lower taxes and the acceptance of competition, we will continue to tread water and be dependent on mediocrity.

    So you are misguided and factually incorrect when you say “if it was going to happen, it would have happened by now.” It has never been given a chance to happen, which is why it has never happened.

  5. mikel says:

    Others may add to this, but the above is an ideological argument, not a fact based one. Lower taxes? Resource industries, which make up the large part of NB’s economy, pay almost no taxes at all. They pay ROYALTIES, and in cases like Potash and natural gas, those royalties are almost nonexistent. In fact LITERALLY non existent for potash.

    For other industries, say knowledge based ones, again, corporate income taxes are almost the lowest in North America. Competition is NOT strengthened through ‘lower taxes’. You think some company in St. John is going to think “hey, CIT are so low we should start a pulp mill”. Competition is low in part because the population is small, however, it is mainly due to the fact that Canada’s anti monopoly laws are non existent. Even Adam Smith, the father of capitalism knew that monopolies kill competition.

    Several newspapers have tried to start up in New Brunswick, not ONE of them said “we went out of business because taxes were too high”. They went out of business because Irving undercut them.

    Without laws restraing capital, the end result is ONE company. Take a look at the grocery industry for the entire COUNTRY. There are two or three players who pretty much own the whole thing. In our city there are about ten grocery stores, but only two owners of those stores. If I tried to start a store it would be ridiculous of me to complain “hey, I can’t make a go of it because taxes are too high”. Particularly if those two companies are going out of their way to undercut me til I go out of business.

    Stephen’s scenario is close, but not quite. Very rarely will government provide the majority of funding a project needs, look at the case of FatKat. A world class animation studio which only got less than 5 million in funding even though at one time it employed over a hundred people. The other player is unfortunately almost ALWAYS overlooked-namely, the banks. Without a green light from the banks, government won’t budge. But what do we really know about bank financing for business? Almost nothing. Critics aren’t completely crazy who claim we are run by a banking cartel, its often very close to that.

  6. richard says:

    “I think the ethos has always been that government can be the only vehicle in creating wealth and prosperity.”

    Huh? That is hardly the driving ethos in NB. We would be better off if govts took seriously their role in creating wealth and prosperity. Instead, we’ve had govts that stood by and did nothing constructive as monopolies developed, or tried to prop up failing firms. It would be more accurate to say that NB govts have decided they have no role in creating prosperity, that they are just caretakers.

    Government investment, direct and indirect, has been instrumental in economic development in other regions. In ON, for example, government investment and support, via trade law, protected the auto industry and encouraged its growth into a dominant factor in ON. This has resulted in a huge ROI for govt tax collectors, plus provided employment for thousands. Direct investments by provincial and federal govts helped to stimulate the energy, potash and ag industries in the Prairies and Nfld. Govts do have a large role to play in creating prosperity; a role that is far greater than just fiddling with the tax system.

    ” Until this ethos changes abd competition is allowed to fully bloom through less intervention, lower taxes and the acceptance of competition, we will continue to tread water and be dependent on mediocrity.”

    Is there any correlation in the rest of world between “less intervention, lower taxes” and prosperity or economic growth? No. I realize that you don’t want to deal with facts, but the fact is, the libertarian, neocon, approach to ED has been tried and tried again , and has failed miserably every time. When theories don’t work , you abandon them and move on. Unless of course you have confused economic theory with religion or magic. Perhaps you would like to invite the magical flat tax fairy over for a visit?

    If NB has an economic problem (and it does), it is largely a result of the failure of govts to invest in the right way. Its been a failure to stimulate inovation and a failure to look down the road. Our govts have failed because we have not pushed them in those directions.

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