It's The Economy, Stupid

I heard Don Roberts – the CIBC vice chair and forestry industry expert – give a talk on Friday.  I had read his stuff but that was the first time I heard him talk.  He has a clarity in approach that is refreshing and he backs up his conclusions with strong research.  

I found one of his slides interesting.  He was talking about what investors want when they are considering investing – in anything – a province, a specific project, an unproven technology.  They want, in his words, TLC – transparency, longevity and certainty.

I thought this was a very good way to look at economic development.  Companies that could be investors here – it doesn’t matter to me where they come from – Tracadie, Toronto or Toyko – want to know there is transparency (no hidden surprises that will end up threatening the viability of their investment in the province), longevity (they have a reasonable expection that their investment is secure) annd certainty (they can expect that the government won’t change the rules of the road after the company invests here that hurts the viability of their investment here).

Some people are uncomfortable even talking about the role of government here.    They see no need for government to think about ROI or ROE.  The government is in the business of providing public and social services not worrying about business success.

But business success is at the heart of economic development which is a necessary precondition for social and community development.  How can we have successful social development without a relatively strong economy?

It seems to me that government – in a serious way – needs to understand the economic environment facing our key, exporting industries whether it’s forestry, mining or ICT.  These industries need to be able to make a buck here – need the TLC that Don Roberts talks about – or else over time they will not invest here.

I am not as worried about the companies that serve only local markets because they are facing the same cost environment.  If energy costs rise – it rises for them all and doesn’t impact competitive advantage.  However, the companies playing on a world stage don’t compete in New Brunswick – they compete with firms in those external markets.  Any cost, regulatory, currency, etc. shocks directly hurts their competitive advantage.

It seems to me that we should apply the same thinking we would place on our own personal investments.  We expect a reasonable return on our investments (subject to our risk profile) and expect our financial planner or whomever to invest properly on our behalf.   Our companies should expect – over time – a reasonable rate of return on their investment in New Brunswick. Now, some of them will embark on bad or risky business models and will end up bearing the imapct of that.  It is not the government’s role to bail out companies that get involved in bad business models.

It is the government’s role to try and ensure it doesn’t cause the problems with a company’s business model – particularly after the company invested here in good faith.