Professor Donald Savoie was invited recently by Brunswick Press to pen a series of articles outlining New Brunswick’s fiscal predicament and providing his remedies to the situation. Dr. Savoie is a very well-respected expert in issues pertaining to public administration and the relationships between the public service and politicians. On the other hand, he does not appear to have any particular expertise in economic development per se. While he can speak to administration and governance issues with a great deal of authority, his views on how economic development and fiscal matters are perhaps less valuable. It might have been more useful if Brunswick Press had found a group of subject experts and had them tackle those issues pertinent to their expertise (that raises the question as to why we get so little in analysis and commentary on New Brunswick issues from taxpayer-funded university staff). In any event, here is a brief rundown of his commentaries:
June 5 Fiscal Crisis Sparks Call to Action
Dr Savoie starts off well-enough; he reviews the financial issues the province faces and points out that, while the Province relies upon transfer payments for significant amount of its revenues, there is growing resentment in some parts of the country with respect to these transfers. The federal government is taking steps to slow down the growth in funds they transfer to the ‘have-not’ provinces. Add to that a stagnant economy and a significant debt, and it is clear the province is in difficulty. What to do?
Well, Savoie starts off with health care costs. Those costs represent a large chunk of the provincial budget and (thanks in part to the health transfer funding formula established by the government of Paul Martin) have been steadily on the increase. Naturally then, health care costs have to be considered as an important part of the discussion. But this point Savoie seems to veer off course and spends the next few hundred words condemning the New Brunswick Medical Society for having the temerity to challenge the Health Minister. Apparently, the Health Minister’s approach is not to be questioned, just accepted. Savoie then, without offering any supporting data, infers that there are a significant number of cheaters within the physician community and that ‘technology’ must be reducing the work load of certain specialists, yet their income remains unaffected. A couple of phrases for Dr. Savoie to consider – ‘waiting times’ and ‘patient registry’. Technology may reduce workload per patient, but does not necessarily reduce demand for the specialist’s services. First the waiting list has to be worked through, and there are significant waiting lists for various medical treatments in NB.
With respect to health care costs, Dr. Savoie has added some heat, but no light. It’s 0 for 1 at this point; hopefully he will do better in his next commentary.
June 6 Everyone Has a Role to Play in Righting Ship
In a rambling discourse that again adds little to the discussion, Savoie calls for the HST to be hiked by two points (with a 5 yr sunset clause) and an end to partisanship bickering. Both issues have been raised previously; I am not sure why Dr Savoie thinks these are unique or worth expressing again. He also called for zero-base budgeting for every agency and Department and wants every nickel justified. Think about that for a second. Would that process not cost a fortune in time and labour? Of course, one could hire consultants to review operations, such as has been done with DOT and Health. Consultants are hired to find waste, and so of course they always find waste; if they don’t there is no perception of value in their work. I am not saying efficiencies cannot be found and that reviews are not required, just that the benefit needs to justify the cost of the review. The points raised by Dr Savoie here can be found around the table at any Tim Horton’s. I hope no one is paying for Savoie’s articles when the same proposals can be obtained for free at Tim’s. That would be inefficient, and we can’t have that.
Zero for two.
June 7 Tenacity is the key to averting disaster
In this commentary, Dr. Savoie has focused on the role of local entrepreneurs. Specifically, he sees them as the key to rebuilding the New Brunswick economy. He cites the Irvings and McCains as examples of tenacious local business people that should be emulated. We must, he says, encourage local businesses by providing tax reductions, making venture capital more readily available, and promoting the entrepreneurial spirit among the young people of the province. Savoie believes that we can make up for tax revenue that is lost from tax reductions by cutting budgets of Invest New Brunswick and other economic development agencies. He infers they are not working, but did not present any data on the performance of those agencies. He appears to believe that it is a mistake to think that large companies ‘from away’ will establish here and create sufficient jobs to make up for any offered incentives. I see some problems with this approach.
First, nearly all local businesses provide goods and service to local residents. Except for those few that are able to compete sufficiently to replace imported goods, there is little net economic benefit to the province in providing tax reductions to those businesses. Because they are not exporting goods and services, they do not bring any new revenue into the province. The local businesses that should be supported through tax and other measure are those that export goods and services outside the province. Those are the businesses that bring new revenue into the province and create new employment. Specifically, we should support those businesses that are exporting high-value goods and services; those create the high-wage jobs the province needs. Unless that is the main goal of the business in question, I see no need for tax reductions or special treatment.
Second, after a somewhat patronizing recap of the ‘cargo cult’ and its implications, he notes that other parts of this country often see the Maritimes as too reliant on big government and lacking in ‘risk-takers’. Savoie points out that Ontario and Quebec have also been the benefit of large taxpayer investments, for example, support of the auto industry and the pharmaceutical industry, and those provinces also act as the ‘home’ for a large number of federal government departments and agencies. It seems to me that the proven success of significant government investment in establishing foreign companies in Central Canada suggests that businesses ‘from away’ can be attracted here in greater numbers, provided the right package is offered and the provided the ‘fit’ to the region is sufficient for long-term success. Surely, a case can be made that long-term reductions in transfer payments will be possible as the economy of the Maritimes grows. By contrast, if the federal government will not now invest significantly in re-building regional economies here, then there will be greater demands for larger transfer payments down the road.
I remain unconvinced by Savoie’s arguments here, but he is at least getting into some meatier subjects, so I will give him a point here.
June 8 N.B. needs to embrace opportunity
In his last commentary of the series, Dr. Savoie correctly points out that entrepreneurs need opportunity – you cannot get blood from a stone. And in a stagnant economy, there are fewer opportunities, especially for those businesses that provide goods and services to local populations. So how do we create more opportunity?
Savoie sees shale gas as an opportunity and I agree. Savoie points out quite correctly that the positions of the NDP and Liberal parties are wrong-headed (they essentially appear to be proposing a moratorium on exploration and extraction for an undetermined amount of time, or until certain unspecified conditions are met) and that a real cost-benefit analysis of shale gas cannot be done until we have better estimates of the size of the reserves. In other words, the exploration phase should proceed immediately and the resulting data used to help inform us as to the potential economic benefits.
The second thrust in this commentary is innovation, and here Savoie points his finger directly at out universities. We need to challenge them, he says, to help grow the provincial economy. In other words, he wants them to take on a mission – the betterment of the province. Perhaps we should look at the U.S. Land Grant College system and how those state universities became involved in the development of their state. Savoie then proceeds to re-state what I and others have previously said – our universities need to change and we need to get them to focus on research and development. That means some significant changes in the structure and organization of our universities, but I as yet see no sign that university administrators will proceed in that direction unless they are pushed very hard to do so.
While I agree with much of what he says in this commentary, Dr. Savoie errs in my view when he recommends that citizens ‘buy local’. New Brunswick has one of the lowest mean incomes in the country; recently Statistics Canada released a report showing that NB was the only province to suffer a decline in weekly income between March 2012 and March 2013. A consequence of those low incomes is less discretionary spending. Frankly, I think it is cruel to try to guilt people into buying from ‘local’ business when the same quality of product is available at less cost elsewhere. It is far more efficient in my opinion for individuals to purchase their goods and services from the provider (local or non-local) that offers the best price and/or the best quality. That allows people to use their remaining discretionary income to improve or better their own lives.
Dr. Savoie has provided us with four commentaries on the state of New Brunswick’s economy. In my opinion, they could have been compressed into one; not a whole lot there really. Still, it is always valuable to have such comments and he is to be thanked for his efforts; I just wish we were getting more analyses from our academics. Given the current state of the province, you’d think that university staff with expertise in the fiscal, employment, health and environmental issues we face would be clamouring to put in their two cents. Instead, the media present us with the same faces and, indeed, it is hard to find a blog or website where NB academics with technical backgrounds are offering their views on these issues. Is there a lack of interest amongst our academic technical experts, or a refusal to engage in NB issues? Do they fear being accused of partisanship? Do they fear being criticized? I do not know what the problem is, but we need to find a way to get more of our technical experts involved in the public discussion.
One significant issue that Dr. Savoie did not raise (at least not in any detail) is the persistent inter-urban and inter-region rivalries that exist in this province. These rivalries have tied the hands of politicians and made it very difficult to use scale in providing services to citizens of the province. Take air services for example. In southern NB, we have three urban areas, and each has its own airport. Everyone seems to be demanding better services at THEIR airport, yet seem unable to accept that their airport is just too small to get those services. The only way to get those increased flights, routes and better schedules is by generating more passenger volume. The only way to get more passenger volume is by combining the three airports into one. A new regional airport (in say the Sussex region) is NOT going to happen. The only way forward then is for the municipalities of Fredericton and Saint John to admit that Moncton is the only feasible location for the regional airport. We now have the highway infrastructure to allow that to happen, so why don’t we just proceed with the inevitable?