AIMS is wrong

David MacKinnon, senior fellow in the Atlantic Institute for Market Studies, serves up another doozy in this Op/Ed piece called “Ontario can’t be Canada’s ATM”.  I’m not going to cut and paste his content because I think you know what is coming.  Have a look for yourself.

I would chuckle about this stuff if it was not so bloody serious. 

National governments around the world use various tools to try and ensure reasonably equal access to government services around the country.  As I have stated before, an expert on Iraq once said that if that country had Canada’s natural resource revenue distribution system, there would be civil war.  But if you were to say (as some tried in the 1970s) that natural resource revenue shoudl be divvied up around the country you would have civil war but it would come from Alberta (and now Danny).

As for Ontario, the ATM for Atlantic Canada’s largess in AIMS’ view, Ontario built much of its success on the back of Atlantic Canada.  With the federal government’s help, billions were spent to cut off Atlantic Canada as a trade route to central Canada (the St. Lawrence).  For 100 years or more, many of Atl. Canada’s most educated and talented folks have left to take jobs in Ontario.  While people are takers from the government (youth and seniors), they stay here.  When they are contributors (taxpayers), many move to Ontario.

Of course, we won’t mention that almost all of Atl. Canada’s wealth (pensions, RRSPs, etc.) flow through the great Ontario. 

And, let’s not forget the huge federal government spending to prop up economic development in Ontario.

I would suspect that New Brunswick could be the ATM for Ontario if the federal government had adopted a completely reverse policies over the years.  How about using trade barriers to force Ontario to trade with New Brunswick and not Michigan?  That’s exactly what the feds did back after Confederation.  It cut off our natural trading relationship north-south to try and force and east-west.  How about an Auto Pact with the industry centered in Saint John/Calais, Maine instead of the GTA/Detroit?  Obviously I could go on ad nauseum but you have heard it here before.

There are two basic ways to achieve economic development.  Strike oil (or other natural resources) or build globally competitive industries.  Ontario has built – with the massive support of the federal government going back generations CD Howe and before – very successful global industries – pharma, aero, auto, plastics, finance, IT, and on and on. 

The problem is that there is a grain of truth to the AIMS message.  Equalization and EI have resulted in some unintended consequences.  They have been used by the federal government as cover for not taking economic development here seriously.  That is true.  But AIMS, Fraser and all the other stink tanks never talk about serious economic development policy for this region.  It’s always cut and run.

Now it’s cut and run or you will sink Ontario.  That is a  powerful message coming from Halifax’s AIMS.

I think this is a rising tide that cannot be stopped.  50 years ago, half the people in Ottawa had some direct connection to Atlantic Canada – parents, uncles/aunts, etc.  now it would be down to maybe 25%. Within 20-30 years, almost every elected official in Ottawa with the exception of those from Atlantic Canada will have no connection here and most will have likely never even visited this place.

The idea that Equalization is enshrined in the Constitution is laughable.  They have ‘tweaked’ it multiple times in just the last 15 years.   Eventually they will force the AIMS/Fraser solution on the Maritime Provinces and it won’t be pretty.  There will be huge social unrest.  There will be serious dislocation and community collapse.  Then there will be a Royal Commission on the Maritime Provinces problem’ and that will lead to forced Maritime Union and an even further scaling back of government in the region.

This will likely happen by 2030 or so if current trends continue.  If there is sustained economic hardship in Ontario, expect it to happen within 10-15 years from now.

I believe there is an economic development-based solution that would avoid this outcome.  That would result in a place like New Brunswick having a strong economy that was generating enough tax revenue to cover its own freight.  A place with strong regional economies anchored by urban centres and supported by rural communities.

But we have to take an Ontario-style approach to economic development.  The way CD Howe built Canada’s military industrial complex in the Windsor-Montreal Corridor we need to have some similarly successful economic development program for the Halifax to Moncton Corridor.  Or the Belledune to Edmundston Corridor or whatever.

The way the feds pablum fed Canada’s technology industries (remember all the telecom, internet and satellite infrastructure was initiated and funded by the feds and based in Ontario), we need early stage support for growth industries down here.  I remember a guy from the NRC giving a presentation on Montreal’s pharma sector.  He said the Feds had been plowing millions into that cluster since the early 1970s and as of 2005 it was a multi-billion dollar industry in the province.  What multi-billion dollar industries have the feds supported in New Brunswick since the early 1970s?

I’m done ranting.  Gotta get ready for vacation.

7 thoughts on “AIMS is wrong

  1. As usual, the story is ‘right’ in its facts, it just doesn’t tell the whole story and omits equally important facts. And unfortunately you fall for its conclusion (for a bit). Canada’s equalization and EI programs are the reason NB doesn’t look more like a third world country. As you say, more changes could be coming and ‘it won’t be pretty’. People forget that up to 1995 Canada was successively ranked as the best country in the world in which to live, now we are getting close to number 20.

    People should check out the link, and the third comment, which essentially says it all. We’ve deconstructed these arguments before, they are primarily a distraction to try to get people off the EI story-that won’t work here simply because there are so many on EI.

  2. Equalization pays for a huge share of GNB’s spending. You hear talk from the Polyannas about how NB has not ‘suffered’ so much from the global recession (thats largely because we did not have as far to fall), but they are forgetting the lag effect.

    Once the global economy starts to recover, the feds will reign in their spending in order to cut the deficits. R&D will suffer, inovation spending will suffer, but NB will see major cuts to fund transfers (as you say, these payments are not protected by the consitution). Then we will see the delayed impact of the recession here, big time. NB is in for a world of hurt, and AIMS will on the sidelines saying ‘cut taxes, trim the fat’. They control the conversation, not the people with data.

  3. “and that will lead to forced Maritime Union and an even further scaling back of government in the region.”

    Perhaps we should cut to the chase, and begin integrating on our own terms before we are forced to do so.

    A combined Maritimes Province would have 25 MPs (~8% of H of C), and 24 Senators (almost a quarter of the Senate). We’d be the 5th largest province, ahead of both Manitoba and Saskatchewan.

    Of course, we could continue to muddle about on our own; fighting our parochial battles until the equalization runs out.

  4. They have been used by the federal government as cover for not taking economic development here seriously. That is true. But AIMS, Fraser and all the other stink tanks never talk about serious economic development policy for this region. It’s always cut and run.

    I think they do, but just view it from a different set of eyes. For instance, AIMS did some considerable research on the benefits and potential, which would arise [in Atlantic Canada], from a trade relationship with much of the eastern states in the US. In other words, they see potential in trumping up trade harmonization policy not only with the eastern US region, but inter-provincially as well.

    Although, you’re right, it would have been nice to see an industry pact signed in our neck of the woods which would have encourage growth in our neck of the woods. If I’m not mistaken, I think the Atlantic Liberal caucus did have something in writing regarding the ship building industry, but it wasn’t even considered because the Ontario Liberal caucus, some odd hundred or so, dominated any industry policy discussion that got relayed to the PM’s desk.

    Industry in Canada (and the policies that follow) is definitely tough political sledding if you’re a maritimer.

  5. “NB is in for a world of hurt, and AIMS will on the sidelines saying ‘cut taxes, trim the fat’. They control the conversation, not the people with data.”

    Richard, AIMS and Fraser may be on the sidelines, but it was CD Howe [Mintz] that was on the inside convincing provincial Liberals how to rework the province’s economic structure and use recommended tax changes as a cornerstone for their “self-sufficiency” agenda. Not that I care though, as I think many of the recommendations offered up in the recent Budget were good.

    But it will all be for not if they don’t have any policy direction behind the changes (i.e. an action plan to court a specific industry to the province). And let’s face it, competition for investment is going to be more intense then ever in the coming years once the economy heats up again, so yes, these tax reforms were more necessary than you think, but will not get the bang for the buck if opportunities aren’t courted.

    And with BNB sticking with the status quo, one has to believe the tax cuts will never produce the results that they were initially installed to obtain.

  6. Ah, yes, Mr Mintz, talking-head for the tax-cutters. Are you arguing here from authority (i.e. that Mintz is a big cheese and therefore must be right? Sorry, you can do that in the hard sciences to some extent, but not in the field of economics.

    AIMS, Fraser, Frontier, etc are, of course, just pikers, the Canadian branch of libertarian BS, with ideas and talking-points imported from Heritage, Cato et al. They have been quite successful in changing the conversation and getting the mainstream media to reprint their nonsense, but that does not mean their positions are strongly supported by data. Just the opposite.

    “so yes, these tax reforms were more necessary than you think”

    The ‘reforms’ you are referring to are just broad-based tax cuts. The value-added tax changes were dropped. Still waiting for your historical data showing that these cuts are likely to be effective in significantly stimulating growth, such that we can move towards self-sufficiency. Where’s your data? I’m beginning to wonder if you are one of the AIMS Klowns -first name Brian or Charles?

  7. Richard;

    It is also possible to restate many ad hominem arguments so as to redirect them toward ideas rather than people, such as by replacing “my opponents are AIMS Klowns” with “my opponents’ arguments are BS.”

    Both work. 😉

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