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JDI Roundtable on Manufacturing Competitiveness in New Brunswick

Higgs’s speech could be a game changer for province

Herb Emery

Last Thursday’s state of the province speech delivered by Premier Blaine Higgs could be a turning point for the province. The speech was remarkable in several ways, but most notably in its tone of urgency, a stated commitment to growth led by the private sector, the declaration of several measurable goals, and a call to action.

Also notable was Liberal leader Kevin Vickers’s support for this direction. He appropriately identified that holding the government accountable for achieving the goals would be his focus. This may suggest that the toxic effects of changing directions for the province with each election has ended. But it has taken the province a decade to reach this point, again.

What I heard on Thursday is that the premier does not find it acceptable that New Brunswick is now Canada’s poorest province, on the basis that we are the biggest recipient of federal equalization. He finds it unacceptable that public sector investment equals the size of private sector investment.

The premier identified that the province will focus on growing the economy by creating the policies and conditions for the private sector to drive that growth, rather than having the government do so through its spending and borrowing. He is on solid ground with this shift, solely for the reason that if a decade of unprecedented public sector spending and investment and borrowing has not grown the economy, then why would we expect continuing down that path to do so?

We have wound up deep in debt, highly taxed and more reliant on the federal government and the rest of Canada to pay for what we need and what we want. Surely that is not a good thing.

The premier also announced growth targets which, while not particularly ambitious, are achievable and would represent important gains – even if that is as far as we get. Mr. Higgs wants to raise our stagnant annual GDP growth rates from less than one per cent to two per cent. That would bring the province up to the current GDP growth rate for Canada overall.

The drivers of this growth will be an increase in exports and population growth. The premier recognized in his speech that manufacturing is a long-standing strength of the province, and going forward the goal will be to build on that strength.

He also called for a New Brunswick population of one million by 2040. The province will ask Ottawa for the capacity to bring in 10,000 immigrants per year. He aims to increase the retention rate of immigrants and bring New Brunswickers home.

Admittedly, averaging a 1.6 per cent increase in population per year will be a stretch from our current, near-zero population growth rate, but Saskatchewan did achieve a similar increase in its population size in just 10 years with an export-led strategy. And that was enough to reverse the aging of its population.

Most of all, the premier wants to see more private sector investment. Since 2008, New Brunswick has had around $1.50 in private investment for every dollar of public investment. This is below the $2 private for each dollar public in Nova Scotia and Canada overall since 2008. Presumably, we will aim to have private sector investment reach pre-2008 levels, which would be about $2.50 private for every dollar of public investment. Or we could simply work to close the gap with Nova Scotia and Canada overall and get to $2 private for each dollar public.

The province will need investment in infrastructure to make sure producers are competitive and can get their goods to market. But, we need to recognize that government does not need to build it or finance it. The major builder and owner of infrastructure assets – other than roads, water lines and sewers – has historically been the private sector. The province has limited capacity to be the builder with its finances, which means New Brunswickers will have to be open minded about how we will get these projects done.

Of course, what made the biggest headlines was the announced revamp of Opportunities New Brunswick (ONB), which it appears will be more about supporting and enabling businesses to grow through red tape navigation, business concierge services, and a responsibility for ensuring workforce supply to support business needs.

There was some focus on a belief that subsidies, or incentives, for business investment in New Brunswick would no longer be used, but that would have to be more an aspirational goal than a reality.

As Stephen Lund, the outgoing CEO of ONB has correctly reminded me on several occasions, there is no country, state or province that does not use subsidies and incentives to attract business investment, and to ignore that competitive reality would add the province’s challenges with growth.

Finally, accountability will mean that whoever governs will measure progress toward the stated growth goals and evaluate whether policies, actions and decisions are helping the province meet them. There needs to be an understanding that the province should cease doing things that are not useful and do more things that are.

To this end, the provincial Finance and Treasury Board has already developed an economic dashboard where we can see what is happening with key economic indicators. You can also go to BoostNB.com, where UNB students have annually updated a number of economic indicators and evaluated them with respect to growth goals.

I have seen the premier speak on several occasions over the past year and a consistent message has been that we need to stop the disruption to growth plans and strategies that occurs with the changes in government. Liberal leader Kevin Vickers responded in a way that was heartening in this regard, in that he expressed agreement with the direction for the province laid out by the premier. He stated that he would be holding the government accountable for following through on its plan and meeting its targets.

This means that a failure to execute the growth plan and achieve results would be reason to change the government, but not the goals and the basic principles themselves, such as having the private sector drive the economy.

As hard as it has been for the province to get to a point, again, where a premier can make this kind of speech, the hard work is still to come. We need to know what policies, actions and decisions will need to be determined and it is my hope that they are informed by evidence and determined independent of political considerations as much as possible.

The hardest work of all, however, will be for New Brunswickers to change from a population that waits, watches and judges its governments while expecting failure, to one that answers the call to action and works to make the province better by taking a chance in trying to succeed.

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

This article first appeared in Brunswick News publications – Feb. 5, 2020

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.