Asking the right question

For old timers to this blog, you can skip this one because it is essentially a repeat but I was asked yesterday to explain why this blog exists.  Here is a novel explanation.

Most people ask this question:  What do we need to do to see significant economic development in New Brunswick?

I ask a different question:  What do we need to do to see significant new, private sector business investment in New Brunswick (i.e. new manufacturing plants, new software development studios, new back offices, new regional warehouses, etc.)?

Think about the normal answers to that first question:

We need to support our small businesses.  We need to encourage entrepreneurship.  We need to invest in training.  We need to cut taxes.  We need to reduce red tape.  We must increase access to capital. We need to invest in education.  Government needs to get out of the way. We need to invest in roads (a politician was quoted yesterday saying this).  We need to invest in R&D.  We need to have a strong health care system.

Essentially, when you ask the first question above, the answer will invariably reflect your (and mine) personal experiences and biases.

But ask the second question.  How do we attract significant new private sector business investment (far more than we have seen in the past few decades)?  Then if you answer “we need to invest in education” you see the correlations start to thin out.  The reality is if you ask how to stimulate significant new private sector investment and you do your research you will find that it ends up being a bundle of factors that lead to more business investment. 

In my opinion (and hence this blog), if your goal is significant new private sector business investment the correlations are highest with things such as the competitiveness of your operating cost structure, access to industry-specific R&D facilities and funding programs, tax incentive programs, quality of your marketing effort, ability to prove an available quality workforce for the specific business (and if possible proof that people will move to NB for the specific jobs), etc. 

Things such as health care and even education are more loosely correlated to business investment (although for certain sectors like biosciences the correlations are much higher) and road infrastructure, no disrespect intended, is only weakly correlated to new business investment (again it depends somewhat on the sector.  No one would put a warehouse in the Scoudouc industrial park until that road was pushed through to Route 15).

I think if the politicians, economic developers and community leaders started to really consider these issues they would come around at least partially to my point of view and they would take far more seriously the issues that I think are highly correlated to business investment and back off – at least short term – on issues only weakly correlated to new business investment.

Consider Miramichi again because that seems to be a topical area for discussion.  The local MP was talking in the media about all the new money going into roads and he hoped new tourism projects – to foster ‘economic development’ in the Miramichi.  All due respect, roads won’t do it and seasonal tourism jobs at $9/hour won’t replace $35-$40/hour mill jobs.    This MP should look at this blog and ask himself if he is allocating his resources wisely.

Again, that is my opinion and I welcome alternative views.