Preserving old industries
by Fred McMahon


The Moncton Times and Transcript, The Halifax Daily News

The age of wooden ships and iron men was an age of gold for the powerful economies of New Brunswick and Nova Scotia. But, iron ships took to the sea, and our ship-building industry rotted away. We hung on to the old, and failed the new.

Like most myths, this is part fable and part truth – but it’s oh, so relevant today. We still hang on to the old – at huge expense – and fail the new.

In 1867, both Nova Scotia and New Brunswick boasted advanced, diversified economies. Neither was simply dependent on ship-building. The cause of the Maritimes’ fall from grace is controversial, in part because some regional commentators always seek to shift blame for our problems. Thus, we evade tough decisions and responsibility for our fate.

But, here too is some truth. Sir John A. Macdonald’s “National Policy” erected new tariff walls, cutting off natural markets in New England. Upper Canadian interests bought Maritime companies, but failed to re-invest. They built new factories in Upper Canada to replace aging factories here.

Yet, many economic historians struggle to understand why the immense ship-building industry in New Brunswick and Nova Scotia made only spotty efforts to move into the new age of iron and steel. We had natural advantages – not just in ship-building expertise but also in our diversified economy. The powerful Cape Breton industrial complex, the industrial heartland of Canada, was nearby to fuel the conversion.

If not all our cards were trumps, we held a fair hand, but lost the game. More recently, we played a winning hand in the fishery into near ruin, again by protecting the old and failing to welcome the new.

Canada gained a 200-mile fishing zone just as affluent, health conscious consumers were demanding quality fish products. With lots of federal help, we protected old style fish harvesting and processing methods to generate as much immediate employment as possible.

Our quality was awful. The industry relied on selling frozen blocks of fish pieces packed together. Our badly mauled fish was useless for anything else. So many subsidies swirled around the fisheries, people stopped paying attention to the product.

Fishers and workers complained that bureaucrats and fish company officials were interfering with a traditional way of life when they urged better methods of handling. Well, fish had always been left on boat decks and unloaded with pitchforks – and that was that. Government subsidies removed the incentive to change.

At the same time, tiny Iceland – far more dependent on the fishery than we were – was modernizing its industry and developing a world-wide reputation for quality fish. In the end, that approach generated not simply greater wealth, but also more long-term employment. Icelandic fishers received their rewards from the marketplace, not government programs, and that created powerful incentives for quality. Iceland never had a rich uncle in Ottawa, distorting the industry to buy votes.

The Atlantic industry had the ability to change. It’s proven it. As government control and subsidies have waxed, and northern cod disappeared, Atlantic Canadian companies diversified their product line and managed quality. The value of our fish is now greater even if the quantity is smaller.

If only we had done this from the beginning. Atlantic Canada would have been first in quality, the kingfisher of world markets. Who would have thought collapse of a stock and the lessening of government money would create a truly dynamic fishing industry in Atlantic Canada? This would have been the story from the start if government hadn’t wasted billions of dollars holding back change.

Now a Nova Scotian government, with no faith in the ability of Cape Bretoners, is fighting a rearguard action to protect last century’s coal industry while throwing more money at the aging steel industry. We just can’t let those jobs disappear, the government says, they’ll never be replaced.

New Brunswick has done a better job than Nova Scotia in moving forward, in part because New Brunswick wasn’t stuck with a huge out-moded industrial complex from the last century, in part because New Brunswick has been better governed in recent years, and in part because of strong management of the province’s large industries.

We are now heading into the fifth industrial revolution – semi-conductors, computers, fibre optics. “This may explain,” says a recent edition of The Economist, why the United States has “started bounding ahead again, leaving behind countries too preoccupied with preserving their fourth-wave industries” – electricity, chemicals, the internal combustion engine.

If only things were so rosy here. We’re still protecting mid-19th century, third-wave industries, including New Brunswick’s coal industry. We tried to preserve pre-industrial ways of handling fish. And, we’d probably still heroically subsidize wooden boat building if politicians like Nova Scotia Premier Russell MacLellan had their way. The world changes; we have to keep up.