You are what you eat

I just finished what I thought was an insightful column in the T&T on the economic challenges facing New Brunswick. They were written by Roger Haineault who works with a company called Tax Help Inc. – it would seem located in Moncton.

Until I get to the end:

The days of the large company coming in and building a factory employing thousands is gone in this part of the world. Employment, wealth and progress will be driven by the entrepreneur who creates a start-up that issues 50 T4s in his or her fifth year. These businesses are going to be in the service sector, and with the global economy they will work both here in the province and beyond our borders.

When I looked at the source – a guy who helps small businesses with tax returns – it seems clear that he is speaking from the perspective of what he knows. However, this continues to be the dangerspeak that I have heard for the two decades I have been involved in economic development in New Brunswick.

First, his initial sentence here is just plain wrong. We have attacted over 50 ‘factories’ from ‘large companies’ all around the world. Whether you like them or not, these large customer contact centres are just that. The question should be how do we replicate this success in other sectors?

Second, his assertion that “Employment, wealth and progress will be driven by the entrepreneur who creates a start-up that issues 50 T4s in his or her fifth year.”

This would actually be true if we had evidence of it in New Brunswick. New Brunswick has around 31,000 people that claimed on the Census to be self-employed. Many of these have a few employees working for them. Many don’t. But they are the core of the small businesses in New Brunswick. And their average income (personally) is less than the average income of an employed person.

The truth is that most small businesses in New Brunswick are tiny and provide services in their local community. 53% of all businesses in New Brunswick have 4 or less employees. 93.2% have less than that magical “50 T4s” that the columnist talks about. 93.2%.

I am not downplaying them or being critical of them. I am one of them. Jupia Consultants. 2 employees. Providing service mostly in New Brunswick.

And the last point is this issue of doing business “beyond our borders”. That is key. Efforts to stimulate more small business to compete with other small business in small local markets is not economic development (with some possible exceptions where there should be more competition). If you have ten small janitorial companies in Moncton and you put tax breaks and other efforts to encourage more you will just force others out of business or to downsize. The economic pie will remain the same.

Again with the exception of creating more efficiency, unless these mythical small businesses with 50 T4s that he is talking about are doing primarily their business outside of New Brunswick and bringing the economic activity back here, beyond the romantic notion there’s not much to his assertion. And think hard. How many companies do you know that are in the 50 person range that export services (his word, not mine) to the global economy? Cripes we have a hard time getting our small manufacturers to complete globally – let alone our service providers.

There are some. Good ones. Environmental firms doing work in Central America. Training companies putting on courses in Africa. Animation firms building product for U.S. partners.

And I say we need to find these Gazelles and do what we can (if anything) to nurture them and their success.

But please understand the difference between the two. Because 30 years of policy designed to encourage New Brunswickers to ‘start a business’ as an alternative to being unemployed have not worked.