Monday, March 12, 2007

Prosperity in New Brunswick - Part 1

As I listen to the radio the discussion is revolving around the recently terminated Halifax bid for the 2014 Commonwealth Games. As everybody knows by now, the proposal - roughly $1.7 billion - was substantially more than the city was willing to commit. Only $700 million had been pledged from other levels of government.

Now I have no opinion on the Games either way. I could take them or leave them. And it sounds reasonable to pull the plug, but as one caller commented the other day, $700 million just went out the door and down the road. Yes, Halifax would have gone into debt. But it does seem that the decision was based on narrow and short-sighted considerations.

I am reading the the New Brunswick Reality Report, a review of what our own province will have to do in order to achieve economic self-sufficiency. It talks about things like the need to achieve economic growth and to improve our labour pool. But the bottom line is this: "To retain or attract people, New Brunswick will have to offer a standard of living that is equal or superior to that of other jurisdictions." (part 1, p.8)

The report lists four elements to this: first, competitive wages and salaries; second, access to affordable housing; third, access to good education and health services; and fourth, a 'modern urban environment' including the amenities and opportunities cities bring.

New Brunswick is doing poorly on all four counts. It is worth pausing for a few moments to reflect on this.

That wages are lower in New Brunswick goes without saying. When I arrived here in 2001 I was shocked to find how little university professors were paid. No wonder they want to pack up their textbooks and leave! It is not only accepted as a matter of fact that wages are lower here, there are elements in society who want to keep it that way.

The local newspaper, for example, complains that Moncton's RCMP are paid more than regional police in other Atlantic Canada cities. But this is a good thing! We get much higher quality policing, and as a result, Moncton is wholly free of the random violence that has plagued Halifax (and its regional police). Yes, it costs more - but when we needed a helicopter to patrol for the recent Rolling Stones concert, we got one. That's what paying more buys you.

There is this 'traditional mindset' that holds us back on things like this. It's a mindset that says you should pay as little as possible for 'luxuries' like university professors and Cadillac police. It also contributes to problems in other areas.

Take housing, for example. We hear a low about how affordable housing is in the Maritimes. And it is - if you are buying a house. By contrast, however, if you are renting, housing is no more affordable than elsewhere. And your rental accommodations are most likely going to be substandard. This is the result of 'traditionalist' social and economic policies that favour home ownership. Thus, in New Brunswick, taxes on rental accommodations are twice those for single-family homes. That's why it's so hard to find a decent place to rent.

The same sort of thinking applies to education and health. We have voices in our community - such as the local newspaper - constantly arguing for lower funding. The Times & Transcript, for example, just this past week-end questioned whether we as a province could afford our universities and community colleges. This is exactly the sort of thinking that killed the Commonwealth Games bid.

It was an odd thing to be a recent arrival in this province and to be reading about schools that do not have gyms, to be reading about infrastructure that is literally falling apart, to be reading about unacceptable illiteracy levels. The anguish with which the province very reluctantly released funding for a basic facility as a cath lab at the hospital was astonishing. Even conservative Alberta spends top dollar on some of the finest medical facilities in the world. So what was happening here?

We keep hearing over and over, 'we can't afford it', that 'we are too small a province.' But it's simply not true. I lived more than four years in Manitoba, a province that has almost the same population as New Brunswick. Somehow, Manitoba could afford a lot of these things - major universities, health and education facilities, even an NHL hockey team. And we hear the plaint, "We can't afford it" whenever a CFL football team is brought up.

The infrastructure and services that are expected in other communities seems to be stymied by this sense that "we can't afford it" here. Little Brandon, Manitoba, population 40,000 can afford a quality bus service with proper routes, but Moncton struggles with its 50 minute service (thankfully, this is beginning to change). We cannot keep sidewalks plowed here, much less maintain walking and hiking trails. But these are the norm in other cities. Our city engineers' attempts to create bicycle lanes on residential streets are attacked by the newspaper. They should visit Amsterdam, where bicycles have their own roads!

The people who try to save a dime at every turn are squeezing New Brunswick (and Nova Scotia, even more so) dry. While they save every penny, they do not realize that the are creating a community and society in which living is hard and in which there's nothing to live for. Perhaps in the old days it was sufficient that the people would acquiesce to serve God, family and the Company. But people today are looking for more than that.

To be fair, things are changing. Things are getting bettter here in Moncton (thopugh evidently not in places like Halifax and Saint John). The McKenna government did things like build highways and wire schools. This gave us a transportation and communications infrastructure. The City of Moncton parlayed that into a new airport. We now need the infrastructure that supports a transportation hub - not just hotel rooms (though these are coming) but things like a convention centre and entertainment facilities. The sorts of things Halifax was poised to land - before they tossed the funders out on their ears.

I lived in Calgary when it was bidding for the 1988 Winter Olympics. Calgary was a much smaller city at the time, and there was a lot of concern that the city could not afford it. But the attitude was, "we will find a way to afford it." This resulted in a brand new areana (that now houses an NHL hockey team), enhancements to the stadium (where the CFL and university football teams play), light rail transit, the Olympic Oval (which is now producing all those speed skating gold medals), a ski-jumping facility, an entirely new ski resort (in Kananaskis) and more.

But the city didn't stop there. In front of its gleaming new city hall, also completed in time for the Olympics, it build a plaza for public gatherings, and beside that, the Calgary Centre for the Performing Arts right next to the enhanced Glenbow Museum. Across the street from these was placed the new Convention Centre - I have been there a number of times since, including for the city's successful 'Smart City' bid and follow-up conference. Success builds on success. That's why you find the money.

You know - over the last few months I have been talking about my theory of learning as pattern recognition and of education as practice and reflection, and somebody commented that while successful students understand this, unsuccessful students do not. They look at the successful students and comment that they were "just lucky" to get the grade they did. This attitude seems to permeate the Maritimes, the idea that places like Ontario and Alberta are "just lucky." And they do not see how the practice of being innovative is what makes you so.

One of the things that to me really spelled the bankruptcy of the previous government was that it did not even try to lure Research in Motion, which was seeking to open an Atlantic office, to New Brunswick. "We don't go after just any business that's out there," remarked Bernard Lord at the time. Maybe not - but it seems that these high-paying high-tech jobs are exactly what you would try to attract. So what would stop the government from even trying?

The only explanation that makes sense is that the government thought that these jobs were beyond its capacity to attract. That the province was simply not good enough to land high tech employees. That the brass at RiM would look at New Brunswick and ask about things like schools and hospitals and parts and exercise facilities and hotels and convention centres and the government would have no answer. No, these facilities were not in place. because we could not afford them.

When you look at the current government's Prosperity Plan, it is not clear that the lesson has been completely learned. Perhaps - as they're saying on the radio today - the government is trying to cater to those old and conservative people in rural New Brunswick.

Let's look at the proposed course of action in detail:

Post-secondary education and training - it is perhaps telling that the authors included 'literacy and numeracy' under this heading. But there is no vision here. I mean, it's not like no previous government attempted to improve literacy. What needs to be examined is the process and purpose of post-secondary education in the province.

The report reads as though the reason we need PSE is to train workers - to convert existing New Bruins. That is exactly wrong. The reason we need PSE is to provide opportunities for the children of people who move to the province. The purpose of the institutions is not to 'train' existing New Brunswickers, it is to attract new New Brunswickers.

Part of this whole 'traditionalist' way of thinking is that we do it ourselves, that the future is for New Brunswickers (whatever they happen to be) and not people 'from away'. This attitude must be changed. The emphasis on plans that favour existing New Brunswickers - whether they be preferential tuition rebates or programs to repatriate family members - must be eliminated. The focus must be on the New Brunswickers that do not yet exist - what will bring them here, what will keep them here.

This is part and parcel of this whole "we can't afford it" thing. It reflects a thinking that is entirely focused on the small population that currently constitutes Maritime society. Yes, this small population cannot afford it. This small Halifax couldn't afford the games - but a Halifax of a million people certainly could, and that should be the objective. And you know - when I think of Moncton, I am also thinking of the city of a million people. Not as some sort of indeterminate future. But as something I expect within my lifetime. Nothing less. Because it's not that there's a shortage of people in the world - just the will to attract some small percentage of them here.

Innovative equipment and processes - this is how the report is styling 'research and development', and while it should be no surprise to find that I support investments in research, I do not agree that our research should be focused on "value-added and technologically unique goods and services." This is based on a misunderstanding of how wealth is produced. Yes, the making of things (innovative or otherwise) produces wealth. But so does a multitude of other things.

It might come as a surprise, for example, to see the City of Moncton list among its revenue-producing activities the study of literature. But this is exactly the case, as the Northrop Frye festival attracts visitors to our city every year. Starving research in literature because it doesn't produce 'products' would be therefore to starve something that generates revenue - the best kind of revenue, intellectual products and services.

The report states, "Innovation comes from the application of new technology, new ideas and new processes." Quite so - but the real wealth is in new technologies, new ideas and new processes. Not the packaging and sale of them, not from the IP they produce, but from the mere fact that they exist in the community. Because - again - it is the existence of this level of development that will attract additional development.

There is a danger in attempting to define innovation as "unique" advantage. This suggests a parochial approach to research and development. By stressing things like IP and partnerships with local corporations you actually discourage additional development.

We already see an example of this in the business community. Existing companies in New Brunswick, such as the Irvings, attract significant support from the government, such as the property tax deal in Saint John (worth about $125 million - imagine what you could buy for that). because these local companies obtain such advantages, they are able to compete successfully against any outside company. Why would Shell or Esso or BP build gas stations in New Brunswick? It's pretty hard to compete against a company that is saving $125 million off the top.

You see this a lot in New Brunswick, from top to bottom. Companies parlaying political ties into economic advantage, which they use to keep the competition at bay - and out of the province. Only in some locations - such as Moncton - is this hold being broken. Imagine what it must have taken for Home Depot to finally convince itself it could compete with Kent on its home turf (and, note,. without that competition we would never have seen Kent lower its prices or even open on Sundays).

Rather than creating a 'unique advantage' for New Brunswick companies, we should be going out of our way to level the playing field. We should be saying this like, our research is available to everyone. Companies will figure out for themselves that moving to where the research is means that they hear about developments more quickly. That the advantage to being in Moncton isn't low wages or government handouts, but the stimulating atmosphere of research and innovation.

New business development - again, this smacks of that whole 'us against the world' attitude. As though prosperity will come from existing new Brunswickers creating products that they can export to the world.

Yes, developing exports will help an economy. But so will developing a domestic market. One of the reasons the United States can export almost at will is that products can be developed and sold at home first.

This is important because it is the key to leveraging any product or service that we do sell. If we are selling something strictly for an export market, we receive no advantage as a community. We don't save on shipping costs because we don't buy the product. We don't gain from inside knowledge because we don't use the product.

The companies mentioned in this section are information technology companies who are managing to sell their wares abroad. That's great - but where is the benefit local companies could be obtaining? These companies sell e-learning, for example - but where is the major consumer of e-learning products (such as an online university)?

The key here is to look at our strengths - and then to develop local markets for those strengths. These local markets will, in turn, become businesses that have an advantage world wide.

And this is a strategy that is more effective because it is open. It doesn't favour existing new Brunswick companies - it is something that could benefit any company moving here. Indeed, it become an attractor - by becoming a consumer of some New Brunswick good or service, the company increases its competitiveness by moving to new Brunswick (now imagine Bernard Lord being able to go to RiM and say "We will improve your competitiveness" (rather than "we will support your competition with subsidies")).

Target Large Corporations - sure, nothing wrong with large corporations, provided (a) they do not obtain unreasonable subsidies from governments, and (b) they do not successfully lobby for lower taxes. These are things that corporations, and especially large corporations, do to leverage their advantage in the marketplace. And governments need to be resistant to that.

Why? Because a corporation can move on after it has bled a city or a province dry, but the city or province cannot. Look at how resource companies sometimes operate in industry towns. What long-term advantage did Nova Scotia gain from its coal mines? What long-term advantage did New brunswick gain from its forests?

The relation between a company and its community must be understood as an exchange. The company will extract wealth from the community - it will take its coal and timber, its fresh water and its wind, it young talent and its government services. In return the community should demand a fair exchange. Infrastructure and services that can be built and maintained indefinitely into the future. The development of local talent and enterprise that will allow it to diversity. The renewal of renewable resources, and the replacement of resources that are not.

This may seem like a hard sell to large companies but its not.

No company other than a predatory fly-by-night will want to locate in a community that is allowing its assets to be depleted by its business community. Such companies look at such a community and conclude that not only is there no wealth to share today, but also that there will be no viable community in the future. To locate in such a community means replacing the assets that have been drained - and that's not a good business move.

If we provide Bell Canada with incentives to attract it to Moncton, we will land Bell Canada. But if we offer to be good customers, we will attract all three - Bell, Rogers and Telus. All of whom will have an incentive to invest in the community, to make it a bigger market, than to take what it can from the community and leave.

This is something that was not understood by the previous government. It felt that the route to prosperity lay through playing favorites and offering sweetheart deals. As the report notes, the NRC was intended to help develop technology clusters. This was killed by the previous government. The NRC, which should have been benefiting the entire community, was led, through a policy of developing patents and licensing technology, to favour only a few special relationships. Rather than create a cluster, the NRC tended to pit New Brunswick companies against each other. The NRC needs to encouraged to engage with the community, to pursue a strategy of sharing innovation rather than of hoarding it.

The report talks about the importance of leadership. It also states that "New Brunswickers should demand that both the federal and provincial governments double levels of investment in economic development." This is all very well. But it must be understood that the investment must be on effective economic development.

And in particular, this means that the investment must be on infrastructure, on developing the overall competitiveness of the province. It must be, in other words, on investments that every person and every company can use. On things that will benefit not only those people and industries that already exist in the province, but also those that have yet to move here.

This is the only investment that will have any yield. If the money is spent instead picking favorites, then any investment in one company will be offset by a reduction of expenditures by another company. Give Bell a $1 million incentive, and Tuelus drops $1 million from its allocations for future investment in the province. We gain very little, if anything, from directed investments.

That's why, ultimately, the expenditure on the Commonwealth Games would have been good for Halifax. Not because it particularly needed stadiums and sports facilities. But because it was an investment that would be enjoyed by any current and future resident of the city. It's the sort of thing you can mention when you're talking to the chair of Research in Motion. "Oh yes," you'll say. "That star athlete your company is promoting in its advertisements can be based at our swimming pool."

So let's look at the realities:

1. We need to increase our population. That means we must attract people who are not yet here.

2. We must be prepared for sweeping changes. That means that the politics of special favours and influence must end. No more special deals.

3. We need to increase labour productivity. That means shifting our economy from an emphasis on producting things to an emphasis on producing ideas.

4. We need large scale investments in infrastructure. That is not a way of connecting rural and urban - it is a way of strengthening our cities. Period.

5. Exports? No. Exports are a part of a strategy - but we also need to learn how to gain advantage from our local production. If nobody grows trees like New Brunswick - then we should be selling them to New Brunswickers.

6. We need to expand our corporate base. We need to level the playing field and stress the viability of our communities and not the size of our handouts.

7. Leaders must step forward.


2 comments:

  1. To follow up on the 'just lucky' remark.

    Halifax had the forest in Point Pleasant park devastated by Hurricane Juan a few years ago. Meanwhile, Vancouver suffered a lot of damage to the trees in Stanley Park last year.

    It turns out that Vancouver got twice as much funding to replace the trees as Halifax, and did not have to wait so long to get the money. Vancouver was 'just lucky', right? Or being favoured by central governments, as Halifax city officials are claiming?

    Well - no. It turns out that Halifax city officials did not even apply for money until late last year. They didn't ask for it!

    It wasn't 'luck' that aided Vancouver.

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  2. I realize this post is a few years old, but as a former citizen of New Brunswick, born and raised in a small town in the southern part of the province, I wish to chime in by saying that I don't think you could pay me enough money to move back to what is now the most laughable province in Canada. The fiasco with the "would be" sale of NB Power is ridiculous. The fact that NB has an unnecessary amount of people in government - MLA's for one - for a population of approximately 700,000 - that are paid for what? To keep the province's people satisfied to be on EI or Welfare or in low-paying jobs for the most part? NB is THE MOST unfriendly investment province - allowing nothing by way of opportunity - thanks to the well below par NBSC...business opportunities will go elsewhere because they a: seemingly have no choice due to being stonewalled from the gate by the NBSC...b: a province 13.5 billion dollars in the red isn't that enticing, really...and c: no new business really wants to deal with bilingual issues as they stand in NB (note to the new Premier - he should clean house because, trust me and as I'm certain you know, good opportunities are going to Alberta, Manitoba and Saskatchewan instead of NB - NB who needs these opportunities more than the others). NB is loved for her people and for her raw beauty...but this cannot be enough to make it a desired province of residence. Maybe for a few retirees - but what are they bringing NB? Eventually, their aging bodies - that will flood the already over-worked health care system there...does that math work - I don't think so. Young people want opportunity and NB simply doesn't offer it. Your new Premier has his work cut out for him to shake the image of this sad little province. Oh I love to visit with family and friends and you'll find me once a year on the shores of a beloved lake lot in NB but will I ever move back?...Move back to what? Hardship? Uncertainty? Higher taxes? Lack of opportunity? Failing infrastructure? That seemingly uniform fear of progression? The same issues year after year? Not likely. You can't attract a people with an unattractive package...it simply doesn't work that way. And NB is an unattractive package at this point. That all being said, so far, I like your blog and what you have to say. I appreciate that you are an educated man who is willing to share his thoughts and opinions on matters such as these. You are not a native New Brunswicker but now make it your home and you speak for her people in a very well researched manner, and I appreciate it as I do not see it often. You seem to care, and it is admirable. So from this 30 year old former New Brunswick citizen, thank you for allowing me to share my opinion.

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