Leadership bribe for Atlantic Canada

While attending recent fundraisers in Atlantic Canada, Paul Martin, the federal Minister of Finance, promoted the idea of an ambitious plan to spur economic development there. “There ought to be a national 10-year program in which Atlantic Canada would be essentially given a leg up,” Mr. Martin remarked in Sackville, N.B. But if he really wants to help the region, he should leave it well alone.

The motive for his latest brainstorm is not hard to find. He is the front-runner to succeed Jean Chrétien as Liberal leader, but faces a hard-charging challenger in Brian Tobin, the former premier of Newfoundland and current federal Minister of Industry. Mr. Tobin’s constituency in the east and his commitment to keep the economic development taps wide open — witness recent announcements such as a national shipbuilding program and a national broadband Internet plan targeted at under-serviced areas — have given Mr. Martin reason to redouble his efforts to appeal to Atlantic Canada’s have-not provinces. Ten-year plans though are not the way to do it.

The region is already the beneficiary of a five-year economic plan unveiled just last summer; the $700-million Atlantic Investment Partnership (AIP) was announced by Prime Minister Chrétien on the eve of the last general election. There is also the Atlantic Canada Opportunities Agency, which is administering the AIP along with a nearly $300-million per year grab bag of other economic development goodies. This is over and above provincial equalization payments and implicit subsidies in programs such as unemployment insurance.

These federal programs have not helped. The track record of direct government interference in Atlantic Canada is abysmal. As Mr. Martin was touring the region with his promises, Nova Scotia was interring the remains of two previous disasters resulting from decades-long government plans. What was left of the Sydney steel mills was auctioned off last week, but the $9-million to $14-million expected from the sale is scant recompense for the $3-billion that provincial taxpayers have spent bailing out the mills since 1967. The last of the Cape Breton coal mines that supplied the steel mills are also in the process of closing, marking an end to the more than $1.6-billion that federal taxpayers poured pointlessly down their shafts over three decades.

In his recent book, Retreat from Growth, Fred McMahon notes that by the late 1960s, employment and business activity in Atlantic Canada had nearly caught up to the rest of the country, after suffering years of stagnation. Unfortunately, revitalization reversed after 1972 when then prime minister Pierre Trudeau secured only a minority government after Liberal support collapsed on the East Coast. To buy back votes, Mr. Trudeau lavished transfers, economic development schemes and improved unemployment insurance benefits on the region. The tactic worked to the extent that Mr. Trudeau won a majority in 1974, but the region was spoiled rotten. Unemployment soared and the economy became stultified and increasingly dependent on state handouts. The same cynical and damaging opportunism was repeated by the current government. After being humiliated on the East Coast in 1997, Mr. Chrétien repeated his mentor’s trick, reversed UI reforms, slopped out the $700-million on AIP and won back lost Atlantic seats in the 2000 election.

While the voters of Atlantic Canada have repeatedly rewarded politicians bearing gifts, the region’s chronic economic underperformance attests to the damage that such market distorting behaviour inflicts. It is not another 10-year plan that Atlantic Canada needs, but politicians with the nerve to leave the region to the tender mercies of the unsubsidized market. Only then will it fulfill the promise it showed 30 years ago.