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JDI Roundtable on Manufacturing Competitiveness in New Brunswick

Can anything save N.B.’s economy?

Herb Emery

In March 2016, right after I had resigned my tenured professor position in Calgary to move to UNB, Maclean’s magazine published its infamous article entitled “The Drive-Through Province: Can Anything Save New Brunswick?”

It’s taken a few years, but I think we can confidently answer “yes,” something can save New Brunswick.

The Maclean’s article contributed to much of the ignorance about New Brunswick’s economy and blinded many to the shifts and transformations that were occurring in traditional sectors like forestry and manufacturing. Those sectors have recovered since 2008, unlike their counterparts in many other provinces and U.S. states, but they modernized, got bigger and – thanks to the Route 2 investment – were increasingly concentrated near a main transportation route.

It might have surprised the Maclean’s journalist to know that Moncton, and much of the province along Route 2, didn’t need saving in 2016. It was an overheated, full-employment “corridor” economy, in large part because of manufacturing and the related services and supply chain for the sector. 

Manufacturing’s share of provincial GDP hasn’t changed in 20 years and is high enough that New Brunswick is the fourth-most manufacturing-intensive province in Canada. It continues to also be a major employment sector, counter to the belief its role has diminished.

Ironically, the higher employment in manufacturing in the past was the result of the province’s abundance of labour, which supported labour-intensive production. Today, the lack of available labour is what limits employment growth.

Manufacturing is the only sector outside of publicly funded services like health care and education with higher wage-paying enterprises throughout the province. In other words, it is a sector that offers growth opportunities to both the three biggest cities in the south and for maintaining economic opportunities in smaller cities and communities throughout the province.

And all of this economic resilience of manufacturing was in spite of bad government policy and regulation. Thanks to stakeholders groups that don’t like New Brunswick’s “traditional sectors,” policies and actions of public agencies that contributed to the recovery and transformation of New Brunswick’s economic engine are misinterpreted as “corporate welfare” rather than what Canadian Manufacturers and Exporters described as effective policies that have kept the business climate from declining.

Maclean’s was not wrong in one sense: What can’t be saved at this point is New Brunswick’s “new” post-2008 economy, based on public spending, high taxes and borrowing to create jobs. That experiment has run for 10 years and it has resulted in net job losses outside of manufacturing, and no GDP growth outside that sector following the depreciation of the dollar.

Today, investors are shunning New Brunswick, and that is what’s bringing the “fiscal cliff” – as economist Richard Saillant termed it – ever closer.

Since 2008, New Brunswick has shown that “inclusive growth” can be achieved by not growing. After 10 years, data shows that New Brunswick’s middle class has grown relative to other groups – thanks to an absence of high-income earners who are not doctors, professors (like me), or professionals in the public service. 

Yet greater income equality in income has not resulted in a more prosperous economy, nor has this outcome done anything to address poverty.

So what can save New Brunswick? A recognition that the resilience of manufacturing, despite headwinds, represents an opportunity to grow the economy – but only if we set policies, reform regulations and generally create a better business climate. 

At this point, I don’t think the onus is on manufacturers to do more for the province. The province needs to do for them if we are to see investment in new machinery, equipment and buildings that will return labour productivity growth back to pre-2008 levels. Back then, New Brunswick manufacturing had labour productivity on par with that of Ontario and Canada, and since that time, we have stagnated and are now as weak as Nova Scotia.

For the business sector to save New Brunswick, we need an attitudinal shift. We need to see a government that “gets it done” in terms of twinning the last 41 kilometres of highway in Quebec to eliminate Canada’s most visible inter-provincial trade barrier. We need a government that purposefully uses already-high spending on education to achieve more for workforce development. And we need a government that prioritizes more predictability in energy costs, labour costs and other key inputs for production controlled by government policy. 

To save New Brunswick, we need to bring one simple concept to the forefront. As has been observed for the United States, expanding exports and reaching manufacturing’s employment potential requires a business environment that gives companies – domestic and foreign – confidence that it’s profitable to manufacture here.

And, guess what? New Brunswick had that perspective with its economic development strategies rolling out before 2009. Maybe it’s time to go back and learn what is possible from the period when New Brunswick still believed in its business sector.

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. 25, 2019

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.