Beware the vested interests

Every night is a different game
We gotta work for our fortune and fame
Success is a ladder take a step at a time
And the people will remember your name

Yes I found out all the tricks of the trade
And that there’s only one way
That you’re gonna get things done
I found out the only way to the top
Is looking out for number one
And that’s me
I’m looking out for number one

Looking Out For Number One
Bachman-Turner Overdrive

I will stay away from subject matter on which I have an opinion but very little expertise (like the mind of Paul Wells and the merits of Ronald McDonald). So today, we transition every so smoothly away from one kind of vested interest to another.

I am talking about the story yesterday that Premier Graham is ‘enlisting’ the help of the New Brunswick Business Council.

As I said in winded detailed when this council was formed, politicians and economic developers need to be wary of groups like this. Not because they aren’t not well intended. They are. Not because they are not smart and business savvy – most of them have done more in their careers than I ever will. It’s because their vision of growing the economy may not be in alignment with global best practices in growing an economy such as New Brunswick.

Here’s my logic on this – for what it’s worth.

I believe that the #1 reason for New Brunswick’s lackluster economic performance since Confederation (New Brunswick has not outpaced the national average for population growth from Census to Census since the founding of Canada and in recent years this gap has widened and has now become inverted curves – Canada’s population going up and NB’s going down) is a structural lack of investment. Of not being on the route of global business investment. Other than large infrastructure projects, New Brunswick suffers from a chronic lack of investment – from Canadian sources, from global sources – cripes from our own pockets (99.8% of the pension funds of New Brunswick government workers fund companies outside New Brunswick).

This investment can come in the form of greenfield projects – global or national companies setting up here (manufacturing, IT studios, distribution hubs, etc.) or investment into our local SMEs. As we all know, other than call centres we have had very little greenfield investment and almost no investment in our SMEs. New Brunswick has the lowest percentage of publicly traded companies of any province in Canada (you can count them on one hand) and almost no equity investment from abroad in our SMEs (lack of interest from the sources but equally the SMEs who have shown a reluctance to give up even a portion of ownership to secure outside investment capital).

So for me, most of the economic problems flow from the lack of investment or money required to get things done. Labour shortages come as a result. Lack of public funding to key infrastructure, R&D and education is a result. Chronic regional unemployment is a result. The perceived need for governments to build large worker social safety nets such as EI is a result. Chronically low wages can be a result.

Now, of course these things are all intertwined. Investment doesn’t come to underperforming regions and regions underperform as a result of the lack of investment, etc. However, fundamentally, as Donald Savoie has so eloquently stated, economic development is about money and people.

So, come full circle to the NB Business Council.

They are among the only firms in New Brunswick that don’t have a problem attracting investment capital and many of them have little interest in seeing external firms set up here and steal their labour and raise wage rates.

Now, please, I am not broad-brushing all members of this Council but I know of at least two that have made public comments to this effect: “Why should the government go out and attract companies when they should be supporting those that are here” and other such comments. And, as I have said, another example where an external firm came and and raided IT workers from a local firm because the local firm was only paying $35k for highly talented programmers – who wanted to stay in New Brunswick. The firm coming in was paying (it was in the 1990s) $45k and thought they were getting staff at a real bargain.

The truth of the matter is that some – not all – but some local businesses (and I am not talking about the NBBC here at all) have benefitted from New Brunswick’s weak economy. They export their products abroad. They don’t rely on local markets so the cheaper the wages the better. The higher the unemployment the better. The cheaper the land the better.

Look at Calgary. A growing economy will push up wages, land costs, availability of labour, etc. – all annoying to local business.

Some local business leaders can rise above this. They can see that a strong economic is good for all even if it causes them short term heartburn. Some, not all.

I am about (hopefully) to work with an economic development agency in one of the fastest growing regions of Canada. They are suffering labour shortages, increasing costs, etc. and yet the business community funds this organization to go out and attract more investment into the region. More companies to compete directly with them for staff.

Now, that’s leadership.

And I hope the NBBC has the same approach but I would be wary.