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JDI Roundtable on Manufacturing Competitiveness in New Brunswick

After Energy East: What’s next for N.B.?

Herb Emery

With the likely end to the Energy East saga, a moratorium on fracking, an uncertain future for softwood lumber exports and contentious NAFTA negotiations, it is safe to say that New Brunswickers have failed to find common ground. On the one side there are those opposed to undertaking any environmental risk in new economic projects. On the other, many people are willing to accept environmental risk for the opportunity to create jobs, incomes, wealth and population growth with some certainty.

So, what happens next?

In a recent Telegraph-Journal column, Prof. Donald Savoie called for opponents of resource exploitation to state their plan to grow the province’s economy without exploiting its comparative advantage in natural resources. Unfortunately, I doubt that Savoie’s challenge can be met by these critics, as there is no obvious alternative for growth in New Brunswick.

Instead, let’s be honest and recognize that the growth strategy proposed by opponents of resource-based development is one of gambling. If we are to be gamblers, then we need to understand the stakes.

The status quo of the New Brunswick economy and its aging population carries risks that we must understand. When you choose to not exploit natural-resource export opportunities to generate growth, you are gambling that some other source of new income, including increased government transfers, will emerge. Even the choice to wait in the chance that a better opportunity will come along - much like the old TV show, Let’s Make a Deal - is risky. The innovation agenda, to create startup firms and new industry for New Brunswick, is a worthwhile effort. But the magnitude of success is uncertain, making this a bet, rather than a predictable outcome. 

To understand the downside risk of not pursuing natural resource opportunities for growth, we need to understand the implications of a no-growth economy, should New Brunswick’s gamble - that something else will happen - does not pay off.

Can you maintain the current standard of living in New Brunswick with an aging population and no growth in the economy? Can New Brunswick continue to redistribute income to support regional and cultural needs that the province values so highly? Can levels of public sector compensation remain where they are? Can New Brunswick protect its vulnerable citizens, as other budget priorities like medical treatment expenditures take a greater share of the budget?

It is often claimed that Canadians will do what is right and pay the taxes needed to support what we value. But the fiscal crises of the 1990s taught us that austerity measures are indeed an option for governments and taxpayers.

The decision to exploit natural resources through projects like pipelines is ultimately a political decision. The expected benefits, costs and risks of the projects are not borne equally across locations, individuals, or even generations. The role of our political leaders is to make difficult decisions in society’s best interest.

Historically, governments have sought to de-politicize decision-making by establishing regulatory agencies like the National Energy Board. Such agencies are intended to objectively assess scientific evidence, consider views from diverse interests and recommend courses of action for government that are in the “national interest.” Of late, government leaders have been reluctant to follow these recommendations. Instead, they have struck commissions and launched legal challenges to second-guess these bodies in the face of public concern and lobbying. 

What this means is that the tradition of utilitarian cost-benefit decisions, based on the reasonable risk versus net benefit overall, seems to have been rejected in favour of political consensus. While this empowerment of individuals would seem to bolster democracy, it can also paralyze political decision-making - tilting outcomes toward the status quo, the avoidance of politically-salient risks and public opposition to change. If you have citizens who see no amount of additional environmental risk as acceptable, then it is reasonable to assume that fracking in New Brunswick and the Energy East pipeline will not happen. 

If New Brunswick is going to reject energy projects and not promote the competitiveness of its resource-based industries because of social licence - effectively granting a political veto to a wide range of stakeholders - then supporters of that rejection have an ethical obligation to acknowledge the societal risks of the status quo of New Brunswick’s economy.

Ideally, they would also respond to Donald Savoie’s request and articulate an alternative strategy for growth. Either they should explain their plan to create wealth in other ways, or they need to convince New Brunswickers that we have enough wealth and must lower our expectations of what prosperity feels like.

Herb Emery is a Brunswick News columnist and the Vaughan Chair in Regional Economics at the University of New Brunswick.

This article first appeared in Brunswick News publications – Sept. 27, 2017

The JDI Roundtable on Manufacturing Competitiveness in New Brunswick is an independent research program made possible through the generosity of J.D. Irving, Ltd. The funding supports arms-length research conducted at UNB.