Monday, July 3, 2000
The Globe and Mail

Ottawa’s Atlantic schemes are coming up empty

By Brian Lee Crowley

Where were the 24-year-olds sporting ponytails? The open-necked shirts and running shoes? Where were the computer geeks with ill-shaven chins but visions of multimillion-dollar IPOs dancing in their heads?

The Halifax World Trade and Convention Centre audience at Prime Minister Jean Chrétien’s announcement of the latest fund to “save” Atlantic Canada said it all. The high-tech entrepreneurs who are supposed to be the new Atlantic Innovation Fund’s reason for existence mostly stayed away. Instead, the room was largely filled with those who will be the fund’s true beneficiaries: long-in-the-tooth Liberals, patronage-seekers, university presidents, and some softly purring bureaucrats who have latched on to one of the growth departments in Ottawa’s universe.

In fact, the big risk-takers in the room were not the few businesspeople, but those slightly haunted-looking Atlantic Liberal MPs who dutifully filed in to bask in the reflected glory of their leader’s announcement of $700-million to be spent over the next five years. But the risk they are taking is a political, not an economic, one.

The risk is that Atlantic Canada has moved on from the grand old days of regional development programs, when people truly believed that government could pick winners and that our relative underdevelopment could be remedied by Ottawa’s enticing the right companies to do the right things. It was rare to hear anyone question the motivation behind the spending of billions of dollars in the 1970s and 1980s. Everyone agreed that more federal spending was better than less. But no more.

Now there are more and more voices heard asking what that spending has got us. The occasional skeptic even likes to point out that the region’s economy has done far better in recent years — as regional development spending has declined — than it ever did when the traditional programs were busy subsidizing everything that moved.

But governments in Ottawa, no matter what their political stripe, just don’t know what to do with this region except write cheques, especially in election years. And when the region’s seats may well make the difference between majority and minority government when the next election rolls around, the old reflexes come to the fore. But will the old approach deliver the electoral goods?

The Prime Minister and his entourage have been clever. Yes, they say, they’ve learned their lessons. The innovation fund money will not go on golf courses and make-work schemes, or on skating rinks and playgrounds. This time, they’ve got it right, they claim, and will spend it on what everyone will recognize are the industries of the future: software, biotechnology, e-commerce, marine industries. In fact, if Mr. Chrétien were a little more articulate, he could have made an excellent Harold Wilson, who, as British prime minister in the early 1960s, promised to take that country into the “white heat of the technological revolution.”

Of course, what Mr. Wilson ended up doing was subsidizing dying industries such as coal and steel and building union power that then thwarted technological innovation across the whole economy.

Atlantic Canadians, too, have a little experience in how successful governments are in choosing the industries of the future. High tech, eh? The failed heavy water plants in Cape Breton were “high tech” at the time, as were the failed hydroponic greenhouses in Newfoundland. Countries all over the world have abandoned this foolish notion that bureaucrats are good at spotting winners, whether in high tech or manufacturing or any other field.

In any case, had the Prime Minister bothered to ask, he would have discovered that information technology and telecoms are growing by 20 per cent a year down here, offshore oil and gas are creating thousands of jobs, that biotechnology and other high-tech businesses were already doing quite well, and that places such as Halifax, Moncton and St. John’s are all vigorous growth centres. And we did this in the face of massive federal cutbacks.

Yes, the announcement included welcome initiatives to strengthen university research capacity and ensure that the region gets a reasonable share of things such as National Research Council funding and genuine economic infrastructure money. Most of the rest of Mr. Chrétien’s announcement, however, amounted to a promise to spend more money propping up businesses with taxpayers’ money, albeit in the “right” industries.

We in the East are supposed to be reassured by the fact that private-sector advisory committees will help the bureaucrats in doling out the money, but advisory committees are ignored when their advice is inconvenient, and are traditionally patronage black holes from whose gravitational field no economic enlightenment escapes. And most of the separate $130-million rural development program also announced will almost surely go to get a lot of people “stamped up” for their annual bout of UI.

The Prime Minister has made no secret of his belief that extra spending like this will pay political dividends for Liberal candidates. But resentment at being so openly manipulated makes a politically explosive cocktail when mixed with the region’s growing sense that a policy of high taxes to pay for an open chequebook has locked us into genteel decline.

If, in the next election, Atlantic Canadians reject the Prime Minister’s invitation to trade votes for transitory spending, all the parties in Ottawa will be forced to revisit their quaint mythologies about the region. It can’t happen soon enough.

Brian Lee Crowley is president of the Atlantic Institute for Market Studies, a public policy think-tank in Halifax.
Email:BrianLeeCrowley@aims.ca