It's The Economy, Stupid

I was in a meeting this week where we were having a good conversation about how to revive a local economy.   We need more people.  Check.  We need to better promote ourselves.  Check.  We need to support startup companies.  Check.

My only contribution to the discussion was to remind the room that we actually need a ‘product’ to sell, too.  In fact, product development should be the core of our economic development strategy – unless, as I have said before, you already have an amazing product or products to sell.  In that case (rare) get out there and sell.  For the rest of you, put more thought into what you are selling.

As another reminder, I don’t believe that product development has to be the 1970s style champion development approach.  In that world you protected industries with high tariffs and large subsidies.  That is a ‘product’ but it has turned out to be not a particularly successful model in the long run.

Although, as an aside, this is what Andrew Carnegie argued about the steel industry in its infancy in the United States.  He said the British steel companies could always dump cheap steel on the U.S. market but shouldn’t we build a local steel industry in the U.S.?  This argument was made by many of the Robber Barons and they, indeed, did build local champions in transportation, steel, etc.  protected by government policy.  Would the U.S. have been better off if those industries were not protected in the early years?  You can think about that.

So what is product development circa 2019?  It still involves communities figuring out what they are good at.

Post-secondary education is a ‘product’.  If you attract a thousand more students, you boost provincial GDP by $25 million/year and support 300 jobs across the economy.  Plus you boost your talent pipeline for the future.  Win-win, right?   Well, have a look at the enrollment numbers at our universities.

Product development is blueberries, maple syrup and other natural resources.  Do we have a resource?  Can it be developed profitably?  What government policies could support this effort (assuming there is a strong ROI on the effort)?

If you have a little cluster of insurance firms (e.g. Greater Moncton), product development is asking those firms what kinds of initiatives would help that cluster grow?  Does it need more workers?  Would university-based research help strengthen the cluster? Are there gaps in the supply chain that could be developed here?  Are there government policies that hinder growth?

If you have a university-based research centre that is really good at something, that can be part of product development.

On and on.  People always ask me should we have one or two big sectors that we focus on.  My answer is no.  If you have some big opportunity that could be transformational (think Alberta oil sands circa the mid to late 1990s), sure go after it.  But you can cross home plate with small ball the same as with the big, booming home run. A bunt single, stolen base, passed ball and sac fly still gets you a run.

The key is ROI.  If you can spend a buck and make $10, why not?  Why only focus on the opportunities that cost $1,000 with the potential to make $10,000?  If it takes little effort to bring 100 immigrant farmers to New Brunswick why not do it?  If there are huge challenges to make that happen, then focus elsewhere.

I know for some of you even this kind of soft economic development makes you uncomfortable.  You want to ‘leave it to the market’.  The role of government is to keep taxes low, ease the regulatory burden and then let the market do its job.

I’m a huge fan of capitalism.  I have written many love letters to the the concept of free and open markets as the arbiter of what kind of ketchup wins the war.

But communities can’t just sit back and wait.  They need to define what they want and then work collaboratively – government, industry, education, and other stakeholders – to shape the future.

No large structural subsidies.  No protectionism.  Just efforts to make sure we leverage what we are good at and make sure entrepreneurs and business leaders get to see our story.

Easy-peasy.