On nostalgia and breaking entrenched thinking

Bill Belliveau mentions my recent piece on the need to attract more business investment here in his T&T column today. I have never met Bill Belliveau but I enjoy his columns and his CBC panel discussions. I also think he is a very bright guy – part of the Belliveau clan that we could use more of, quite frankly. But I think he, like so many others, has a distorted view of this issue of attracting industry vs. growing local industry. Have a read:

Historically, New Brunswick, like much of Canada has relied on foreign investment, foreign businesses and foreign technology to fuel its economy. This is both good and bad as witnessed by the recent closures of the AbitibiBowater mill in Dalhousie and the closure by United Paper Mills Ltd. of Finland (UPM) of its mill in the Miramichi. UPM, one of the world’s largest forest products company, announced within days of its Miramichi closure, major new investments in Russia.

With all due respect to foreign investors and branch-office firms in New Brunswick, the only businesses that have survived long-term and grown in this province are family-owned businesses like McCain, Irving, Ganong, Pizza Delight, G.E. Barbour and a few shareholder-owned firms like Lounsbury, Blue Cross and Assumption Life.

Our major telecommunications utility (once known as NBTel) has moved its headquarters to Montreal-based Bell Canada Enterprises. The Fundy Cable Group is owned by Toronto-based Rogers Cable. NB Power continues to struggle as a provincially owned utility.

This is not to diminish the contribution of outside business entities and/or investors but only to make the point that we need to reclaim the strong “head-office” economy that existed in this province nearly a 100 years ago, we need to produce goods and services that can be sold around the world if we want to become self-sufficient.

A few things jump out here right away. 1) Belliveau is making the case that you can’t count on global firms to stay in your province and that 2) you can count on the local guys.

Let me take on these points. Belliveau says:

Historically, New Brunswick, like much of Canada has relied on foreign investment, foreign businesses and foreign technology to fuel its economy.

Wrong. We have had less than our share of national foreign investment for as long as they have kept records. And the little we have seen was tied directly to our natural resources – wood and minerals. New Brunswick has not been able to attract companies here (except call centres) based on the merits of running a global business here. The number of multinational firms such as Michelin or EADS or RIM that have set up in New Brunswick is close to zero. We have the walmarts of the world, but they are only here for the local market.

Belliveau also infers that multinational firms come and go while the local guys you can count on forever. The truth is that many studies have confirmed that multinational firms are far more stable that local firms. Far more. Local firms have an 80% chance of going under within five years. Multinational firms have an 80% chance of expanding within in five years (World Bank study).

Final point on this. Of course, I would like more head offices here. Who wouldn’t? They are more loyal, more stable and committed to the province. But you just don’t have global companies spring up over night? In addition, am I the only one who notices that when these guys talk about the great, local firms they cite examples of firms like McCain, Irving, Ganong, Pizza Delight, G.E. Barbour (all mentioned by Belliveau) that all started 40, 50 or 100 years ago? Where are the Barbours and Ganongs in the past 20 years?

Belliveau once again has missed the point. You can’t wait for local firms to get it done and there is no proof you can incubate mroe Barbours and Ganongs. We have a few, think Speilo, but it is a precious few. In fact, the new model for entrepreneurship is to incubate a good idea and then sell to a multinational. I could name hundreds of firms in Canada from small guys all the way up to Cognos – which just sold to IBM. I just can’t name very many from New Brunswick.

If Belliveau, et. al. have a magic wand that can create real entrepreneurs, I’d like to see it. Economic development policy in New Brunswick for several decades has been about nurturing entrepreneurship and we have seen almost nothing.

I have made my point on this in multiple formats and it basically goes on deaf ears. We always come back to the nostalgia. We forget the reality of the new global economy or we think it doesn’t matter here. We cite the closure of old mills in Northern NB as proof that you can’t trust foreign direct investment – instantly forgetting that many of these mills operated successfully for decades employing thousands in high paying jobs. Now we want to replace these high paying jobs and investment with more desperate attempts to grow entrepreneurs.

Why not try it my way. How about a serious strategy to reseed the economic base of our communities with a better mix of large, anchor multinationals? Alabama has done this with good success. So has Ireland. So has Kentucky. I fully believe – and have made this case as well – that the province’s ability to stimulate entrepreneurship will be enhanced with more multinational firms here.