Good policy takes time to bear fruit.
by Don Cayo


Some government people in New Brunswick are trying to claim responsibility for the “good” news in a report published just over a week ago by AIMS, the think-tank I run. And some people in the Nova Scotia government are trying to duck responsibility for “bad” news in the same report.

Both groups miss the point.

The news – and where you stand on whether it’s good or bad depends, like so many things, on where you sit – is this: StatsCan data shows that since 1993 New Brunswick has surpassed Nova Scotia in per capita GDP – the total value produced by every man, woman, child and company, divided by the total number of people.

What our report doesn’t say – perhaps it should – that Prince Edward Island has also out-performed Nova Scotia. It’s GDP per capita surpassed that of it’s traditionally richer neighbour, but didn’t quite match New Brunswick’s, in both 1996 and 1997 – a fact that delights the Island government.

But the obvious point missed by euphoric and/or despondent government spin doctors is that this report isn’t about them. It’s about their predecessors and the policies of the recent past that led to this unexpected turn-around.

And a more subtle point risks being missed not only in the Maritimes, but also in Newfoundland and anywhere else the economy is performing below par. This second lesson is found less in the analysis of the guy who crunched the numbers, my colleague Fred McMahon.

He concludes, in a nutshell, that policy matters. Nova Scotia is not only traditionally richer than its neighbours, but it has also had more things go its way in recent years. It is less dependent than front-running New Brunswick on forestry, a hard-hit regional industry. Its plants have done a far better job of salvaging and rebuilding the fishery. It has the rich offshore that is starting to pay dividends. And it has even been hit less hard by federal cutbacks.

The entire region is making modest strides to diversify its resource-based economy. P.E.I.’s strong performance may or may not be fully explained by the economic activity generated by the new bridge to the mainland, the subsequent boost to tourism, and manufacturing growth in things as diverse as french fries and aerospace components. But the only place New Brunswick has led the way is with its often-belittled call centres. Logic would say they hardly balance Nova Scotia’s advantages.

The only other difference between New Brunswick and Nova Scotia, my colleague suggests, is policy. New Brunswick started to smarten up sooner. It reduced – though by no means eliminated – spending on political priorities, favouring instead sensible investments like a twinned TransCanada Highway. And it balanced its books.

Those weren’t easy decisions. But the data suggest they were good ones, though it takes a few years for statistics to tell the tale.

Meanwhile Nova Scotia, with a brief change of direction under the unpopular hand of John Savage, continued with business as usual. Former Premier John Buchanan, who preceded Mr. Savage, never seemed to spend a nickel without calculating how many votes it might bring. And he spent millions and millions and millions of nickels that he didn’t have, adding greatly to the provincial debt.

This comparison is not to suggest that the McKenna government was perfect. Far from it. It made some bad investments. It could be high-handed and out-of-touch. It had its own perverse habits – not the least of which was “buying” jobs with taxpayers’ money, a practice that seems to have been warmly embraced by the Theriault government, and one that sparked and fueled a regional bidding war for companies looking for a place to locate.

But economic policies don’t have to be perfect to succeed, at least to the extent of pulling a province ahead of its neighbours. All that’s required is that they be a little better than the other guy’s.

And that’s a key lesson. If hard-pressed New Brunswick could move to the head of the pack in the past few years, why couldn’t Newfoundland or P.E.I do the same in the next few? Or, for that matter, why couldn’t Nova Scotia become the region’s most disciplined spender and regain its “rightful” place?

Fact is, Nova Scotia and Newfoundland both have huge advantages in this little race as their offshore resources start paying real dividends. Indeed, Nova Scotia may well just coast back to the number one spot, especially if New Brunswick continues to backslide on its performance. The Theriault government has already signaled its willingness – or eagerness – to buy jobs and spend on populist, rather than practical, causes. It has cut its surplus to a fragile margin that is unlikely to survive the shock if something in its budget forecast goes awry. It has postponed a promised tax decrease.

But the real “good news” in our report is that economic performance is more than just luck – the brass ring can belong to whoever grasps it, regardless of province or party.